Overview
Tax Notes quoted Matt Frank in a September 15 article titled "Medtronic Opinion May Test Limits of Comparability Adjustments." The article discusses how comparability adjustments will be a key component in Judge Kerrigan’s views in the new Medtronic trial, furthering the debate of the proper limits of adjustments.
Kerrigan’s 2016 opinion accepted Medtronic's claim that the comparable uncontrolled transaction method was the best method for pricing the company's 2001 license of patents, manufacturing know-how, regulatory approvals, and related intangibles to Medtronic Puerto Rico Operations Co. (MPROC). However, Kerrigan also found that Medtronic's upward royalty adjustments did not fully account for the differences between the Pacesetter and MPROC licenses, and she determined that substantial upward comparability adjustments were necessary.
Frank believes that a method should be judged more on its reasonableness than on its strict adherence to the regulatory text. He states: "The methods outlined in the regulations are not ends in themselves that you have to be faithful to, they are tools, and there's nothing wrong with departing from them if you’ve got a good reason."
The full article can be read at Tax Notes (subscription required).